About The Extraordinary Measures Provision

About The Extraordinary Measures Provision

Rumors are that the House’s emerging deal would end the Treasury’s ability to take what are called extraordinary measures to avoid default. Here’s Neil Irwin’s explanation over at the Washington Post of how extraordinary measures work:

The Treasury has regularly used a variety of cash management tools to enable it to continue to carry out normal spending operations when the nation runs into the legal cap on debt issuance, including timing tricks around public employee pensions and use of the “exchange stabilization fund”…. it’s a little like a family juggling its bills by holding off making a contribution to their 401(k) for a while. So technically, we hit the legal debt ceiling of $16.699 trillion way back on May 19, even though Oct. 17 is the D-Day that the Treasury has identified as when the debt ceiling needs to be raised if the nation is to meet its financial obligations.

Eliminating these accounting tricks (the full list is here) means we’d actually wind up hitting our debt limit even sooner, and there’d be no temporary way for treasury to stave off default. Extraordinary measures have been used by the Treasury for decades, under both Republican and Democratic administrations.

When removing extraordinary measures was originally floated last week, House Minority Leader Nancy Pelosi (D-CA) said of the proposal, “It certainly isn’t very smart.”